Electric vehicle (EV) startup Rivian’s stock began trading at $106.75 per share today (Nov. 10), higher than the company’s previously expected price of $78. Its debut put Rivian’s valuation at $85.9 billion, surpassing the market caps of both Ford and General Motors.
The company has yet to turn a profit from the electric trucks it manufactures but nevertheless had the largest US IPO in seven years, boosted in part by well-known backers such as Amazon, which is Rivian’s largest investor. Rivian was started by MIT engineering grad RJ Scaringe in 2009 and saw its stock rise nearly 30% today despite posting $2 billion in losses over the past year and a half. The company is also the target of a lawsuit filed Nov. 4 by a former sales and marketing executive alleging gender discrimination.
“This is unprecedented,” says Jay Ritter, a University of Florida economics professor and an expert on IPOs. The closest comparison he could think of was when the startup Corvis, an optical networking equipment maker with no revenue and nearly $27 million in losses, raised more than $1 billion in its 2000 IPO, a record for a US startup company at the time. Rivian has more cash on hand and institutional backing than the now-defunct Corvis did, but will face competition from other automakers in the EV space as it works to live up to its valuation.
Tesla paved the way for Rivian
It’s hard to imagine Rivian generating the buzz it did today without Tesla. Elon Musk’s electric vehicle company raised $226 million when it went public in 2010 and didn’t achieve a full year of profitability until this year, but it’s by far the most valuable carmaker on the market today with more than a $1 trillion valuation as as of Oct. 25, although its valuation fell following a sell-off this week.
Despite Musk’s tendency to move the market by taking business decisions to platforms like Twitter, the EV maker’s Model 3 car was the 16th best-selling car in the world last year, and is now the most popular vehicle in Europe.
Rivian seems to be on Musk’s radar. In August he criticized the company for filing for an IPO despite having not yet delivered any vehicles.
Debut puts other automakers on alert
A great market debut comes with great responsibility. “At a $100 billion, the company really has to execute to justify that number,” Ritter says. There are plenty of hurdles Rivian still faces as a publicly traded company. It had completed just 42 initial deliveries of its R1T model truck as of Oct. 22 and is counting on a major order from Amazon for its near-term revenue. While the retailer has said it will purchase 100,000 delivery vans from Rivian, the startup’sregulatory filings indicates Amazon is under no obligation to actually do so.
Rivian will also face competition from more well-established brand that have had EVs on the market for longer. About 160,000 people have pre-ordered Ford’s F-150 electric truck, the company said this week, while just under 50,000 customers have placed orders thus far for Rivian’s offerings. Legacy automakers, though, seem to be on alert following Rivian’s debut. While she didn’t mention Rivian specifically today, GM CEO Mary Barra said the high market valuations of EV makers show her company is “so undervalued,” and she sees their investment in electric as a “huge opportunity.”
Correction: A previous version of this story gave the wrong role of a former Rivian employee suing the company. The lawsuit was filed by a former sales and marketing executive, not a human resources executive.